Energy Prospectus

The Marcellus and the Permian are currently the two largest basins by production, with the Permian edging out the Marcellus by a hair. One of the reasons both basins are continuing to produce at high levels is the favorable well economics in the basin.

According to KLR Group, breakeven prices are lower in the Permian and Marcellus than in other plays. “Predicated on company capital performance, the breakeven cost of U.S. oil supply is bracketed by the Midland Basin Wolfcamp/Lower Spraberry (~$48) and Williston Basin Bakken/TFS (~$64). The breakeven cost of U.S. natural gas supply is bracketed by the southwest Marcellus (~$3.15) and Fayetteville (~$3.75),” KLR said in a note today.

Read: http://www.oilandgas360.com/u-s-product ... S_Campaign

Note that the average breakeven price for each basin varies widely between the BEST and WORST acreage in each play. Many companies are showing solid well level economic returns at $40/bbl in the Permian. - Dan

The EIA said, “Production from tight oil in 2015 was 4.89 million barrels per day, or 52% of total U.S. crude oil production. From 2015 to 2017, tight oil production is projected to decrease by 700,000 barrels per day in the Reference case, mainly attributed to low oil prices and the resulting cuts in investment. However, production declines will continue to be mitigated by reductions in cost and improvements in drilling techniques. The use of more efficient hydraulic fracturing techniques and the application of multiwell-pad drilling, as well as changes in well completion designs, will allow producers to recover greater volumes from a single well.”

“As oil prices recover, oil production from tight formations is expected to increase,” the agency reported. “By 2019, Bakken oil production is projected to reach 1.3 million b/d, surpassing the Eagle Ford to become the largest tight oil-producing formation in the United States. The Bakken, which spans 37,000 square miles in North Dakota and Montana, has a technically recoverable resource of 23 billion barrels of tight oil that can be produced based on current technology, industry practice, and geologic knowledge. Bakken production is projected to reach 2.3 million barrels per day by 2040, almost a third of the projected U.S. total tight oil production.”

EIA expects U.S. oil production to rebound in mid-2017. The only way that will happen is if we have much higher oil prices than we have today (over $60/bbl). The EIA is making this prediction because they know there is no way for production to meet demand for oil without development of the U.S. tight oil plays. - Dan